Management Accounting: Cost Analysis, Budgeting, and Planning

This management accounting assignment explores various aspects of financial management within an organization. It begins with an introduction to management accounting, its types, and different methodologies, including cost accounting, inventory management, and job cost accounting. The assignment then delves into the benefits of management accounting systems, comparing them with management accounting reports. A key section focuses on cost analysis techniques, specifically marginal and absorption costing, to prepare income statements. Furthermore, the assignment examines the pros and cons of various planning tools used in budgeting and their application in resolving fiscal problems, including the use of these tools for change and prediction. The document concludes by highlighting how management accounting guides enterprises toward sustainable success by addressing financial challenges, emphasizing the importance of planning, organizing, controlling, staffing, and coordinating for effective financial management.

Management Accounting

Table of Contents
INTRODUCTION:..........................................................................................................................3
TASK1.............................................................................................................................................3
P.1.Management accounting and their types..........................................................................3
P.2.Different method for management accounting.................................................................4
M.1.Benefits of management accounting systems within the company................................5
D.1.Comparison between management accounting system and management accounting report.
................................................................................................................................................5
TASK.2............................................................................................................................................5
P3: Figure out costs
using appropriate
techniques of cost
analysis to prepare
an income
statement using
marginal and
absorption costs.....................................................................................................................5
TASK3.............................................................................................................................................7
P.4.Pros and Cons of various types of planning tools analysis for budget activity................7
M.3.Use of various planning instrument for change and prediction budgets.........................9
D.3(L3&4).Use planning tools for accounting to resolve the fiscal problem of the company. 10
TASK4...........................................................................................................................................10
P.5.Organisations are accommodate administration explanation systems to react to fiscal
difficulty...............................................................................................................................10
M.4 Management accounting can guide enterprise to sustainable success by solving the
financial problems................................................................................................................11
CONCLUSION....................................................................................................................12
REFERENCES:.............................................................................................................................12

INTRODUCTION:
Management Accounting could be a application of management through that we are able
to do analysis, planning, implementation and handle the designed of the commercial enterprise
knowledge news for the management deciding. during this accounting we are able to create
checking account,financial account and income of an organisation. Management accounting
exercise within the administration of the organisation isn't an elementary job. all the same there
area unit some skilled accountants World Health Organization area unit significantly disciplined
for assembly the management exercise in command to realize the most non subjective and future
goals within the firm management accountants will the management accounting exercise for the
news to the inner management for spectacular operation(Cinquini, and Tenucci, 2010).
TASK1.
P.1.Management accounting and their types.
Currently the management accounting doesn't solely reports to the inner management
however conjointly assist the firm in command to realize the property development. efficacious
application of management accounting practices helps the firm to run the operational
management swimmingly. Management accounting is additional peculiarly illustrious fro the
combining of operations, strategic coming up with and administrations. Management accounting
practices support the upper level authority for framing the strategic set up for swish running the
operational method(Baldvinsdottir, Mitchell, and Nørreklit, 2010).
Their types: Cost accounting: This register thinks about with the assorted value of the goods. With the
assistance of this method managers take numerous selections concerning the finance
allotment. once analysing the assorted choices offered with the managers they opt for the

most effective appropriate one by examination it with the past year statements.
accountancy additionally facilitate to keep management over the assorted value of
manufacture by keeping correct check on the assorted issue of the assembly method.
With the assistance of this method organisation will take the choice of future enlargement
additionally(Zimmerman, and Yahya-Zadeh,2011). Inventory Management: inventory refers to the material unbroken within the enterprise
which can be reborn into final product by process them. it's essential to own sensible
inventory management system so state of affairs of non accessibility of material will be
avoided as this may result in wastage of your time and additionally loss of potential
customers. it's additionally essential to avoid matters of excess within the organisation so
as to avoid the price of storage and maintenance that more is additional to the whole cost
of the trade sensible(Weißenberger, and Angelkort, 2011). Job cost accounting system: In associate organisation numerous jobs has there numerous
value that is ultimately additional to the trade sensible. the maximum amount deviation
within the value of the trade sensible cannot be done keeping in mind the price sensitivity
within the marketplace(Lukka, and Modell, 2010). All the shoppers before shopping for
any trade sensible do the comparison of all the goods offered within the marketplace. thus
high value cannot charged from the consumers.
 cost optimising system: Earlier fixing the price of the trade sensible it's essential to
scrutinize the price of different connected product additionally so the price get acceptable
by other consumer within the marketplace. initially it's essential to stay the price
comparatively low so additional customers get attracted towards it(Ward, 2012). as long
as the consumer notice the trade sensible value of the price they're going to attempt the
new trade sensible otherwise it's difficult to present position to the trade sensible within
the competition external.
Management accounting consist of all the necessary financial data and information which
is very important for every company while performing their various functions. Basically it
consist of monetary terms because of their effective role in decision making process.
In fact managerial accounting performs different functions such as-
1. Planning :- First and foremost functions of the management accounting is a planning
process for short term and long term goals. In fact planning plays a very eminent role

because it act as a very indispensable and effective tool in achieving the target of the
organization. In other words budget is the financial planning describes the working of all
the resources in efficient manner.
2. Organizing :- Second function of the management accounting is about arranging all the
activities and task in a proper manner for profit maximization.
3. Controlling :- This technique is very helpful and useful in controlling the risk as well as
losses faced by the organization while running their business.
4. Staffing :- Assigning of right person at a right job according to their skills and eligibility
for smooth running of the business.
5. Coordinating :- It helps in creating a friendly environment which means creation of
coordination in between all the employees and supervisors also.
Management accounting is very much indispensable and effective in the organization
because of their advantageous which helps the enterprise for smooth running as well as profit
maximization.
P.2.Different method for management accounting.
Planning and budgeting:In the management accounting we do the planning of the firm by
it can make the budget of the firm it may be help in the future for the company. we make budgets
monthly or weekly to show the sell of the firm that by it can get the profit. By it we can
understand how much we invest in in the product and what's the output we getting from the
firm(Fullerton, Kennedy, and Widener, 2013).
Project decision decision making:This is the second concept of management accounting
by which the managers of the firm can take decision on the behalf of budgeting. Managers needs
particular type of accounting reports for the costing of the product. By it we can get profit in the
project.
Performance measurement:we can do the performance measurement on the behalf of
output which we getting from the product(Luft, and Shields, 2010). We may measure that the
performance of a operation which had planning and budgeting. Through it the company will run
properly or not.
Some of the mandatory tools used by the management accounting are-
1. Variance analysis :- It is a quantitative investigation which helps in differentiating in
between actual and planned action.

2. Target costing :- It helps in identifying the cost which occurred during product life cycle
as well as desired profits.
3. Activity based costing :- This costing is done by considering the cost and assign it
according to the activity which means this costing is depend upon the particular task.
4. Absorption cost :- Appropriate method or tool of calculating the price of the goods by
considering all the relevant indirect expenses or overheads and direct expenditures.
5. Life cycle costing :- It is an indispensable economic analysis which will be used in
selecting best alternatives from various options. In fact it also compares the initial
investment and future for identification of minimum cost.
M.1.Benefits of management accounting systems within the company.
Management accounting will assist establishment lower their structural expenses.
Enterprise man of affairs usually use management accounting content to review the value of
economical resources and alternative enterprise operations. This subject material permits house
owners to improved perceive what proportion wealth it prices to run the business. higher income
fund area unit a significant a part of management accounting. Business man of affairs usually use
fund so that they have a business road map for forthcoming business outlay. Management
capitalist will prepare business statement regarding shopper demand, expected sales or the results
of shopper worth alteration within the economic market place that is additionally useful for
generating the cash from the market(Garrison, and et. al., 2010).
D.1.Comparison between management accounting system and management accounting report.
Since it's centred on creating returning conclusion with the assistance of past commercial
enterprise info, it's progressive trying and so innovative in nature. it's meant for internal users
like high management and so it's not essential that it's created by following strict road map that is
that the case with commercial enterprise accounting(Van Helden. And et. al., 2010). The
accuracy of Unilever is additionally smitten by however correct that information is, so it's one
amongst the boundary as way as its us ability is pertain.
TASK.2
P3: Figure out costs with the help techniques of cost analysis to prepare an income statement
using marginal and absorption costs.
(a)Income statement for December 2016 based on marginal costing.

particular amount(al
pha)
amount(alp
ha)
amount(bet
a)
amount(bet
a)
Sales
opening stock
variable cost of production
closing stock
variable cost of selling
contribution
fixed cost of production
administrative cost
profit
Nil
112500
-9000
207000
(103500)
103500
-20300
(110200)
Nil
56000
-4800
120000
(51200)
68800
-10600
(67200)
(105000)
(27000)
36400
(b)Income statement for December 2016 based on absorption costing
particular amount(al
pha)
amount(alp
ha)
amount(be
ta)
amount(bet
a)
Sales
opening stock
full cost of production
closing stock
working overhead
gross profit
less non production overhead
less variable selling overhead
less fixed administration overhead
Nil
187500
-15000
207000
-172500
34500
Nil
91000
-78000
120000
-83200
36800
76300
-3900
-27000
45400

Working note: $
overhead absorbed= (2500*$30)+(1750*$20) 110000
overhead incurred= 105000
over absorbed overhead 5000
(a) Absorption profit of costing= $92000
variation in profit= change in stock*fixed $18000
cost per unit=2000*$9=
marginal profit of costing= $110000
Since stock levels have down in the time period, marginal costing shows the higher profit figure,
therefore marginal costing profit will be $18,000 higher than the absorption costing profit, i.e.
$110,000.
(b) Marginal profit of costing $62100
variation in profit=change in stock*fixed $52500
cost per unit=(8500-6750)*$3
absorption costing profit $56850
Stock levels have down in the period and therefore marginal costing profits will be higher
than absorption costing profits. Absorption costing profit is therefore $5,250 lower than the
marginal costing profit.
TASK3.
P.4.Pros and Cons of various types of planning tools analysis for budget activity.
Budget management is crucial for the spectacular operation of economic enterprise and
this might facilitate in creating the organisation property. Now, there has been some
professionals and cons moreover of for budget management. budget management assist the
Unilever organisation in order that the organisation might ready to create the effective set up for
the business enterprise, strengthened the potency moreover, rising the communication moreover

for the betterment of the firm, management the firm, co-ordination the whole departments of the
firm, motivation of the workers, increasing the revenues of the firm, approximation the loan or
business enterprise support demand of the firm and activeness in creating the uniform policies
These blessings has been delineate hereafter: Formulation preparation: preparation is that the basic would like for any firm's
improved. this is often the tool by that organisation would ready to create the effective
call and strategy for the betterment of the objectives. this is often the first stage that is
required before implementing the set up of the firm. By this tool, organisation would
ready to grasp the in and out concerning the longer term comes on that organisation ought
to work. like- price of project, labour needs, material needs so several things got to grasp
earlier. Unilever conjointly|also will|will} grasp the money that organisation ar reaching
to pay on a particular project and organisation also grasp the incoming of capital that are
acceptable in future year.
 Improve the productivity: productivity of the firm may be improved with the assistance of
budget management. this {can be} the tool by that organisation would ready to create
their productivity higher in order that the organisation would ready to gain the higher
profits which is why firm can create property development.
 Adequate communication: With the assistance of correct communication among the
every departments of the firm, organisation might perform in a very higher means and
conjointly create their operation thus effective at render timely data.
 Control: budget management assist the organisation to manage the full firm in order that
the firm might eliminate the waste from every divisions and create the organisation thus
profitable. cash makes the firm to match the particular outcomes with the expected
outcomes then attempt onerous to eliminate the deviation between the 2 method. Also,
organisation can take a choices effectively via dominant.
 Co-ordination: this may assist the organisation to co-ordinate every departments for the
effective utilization of human resources. cash method encourage the co-ordination among
varied department of the firm. It supports the centralised rules of different operations. the
money committee perform as a co-ordinator of operations, sales and different divisions.
the numerous quality of cash preparation is that it organizes exercises across over
different departments(Macintosh, and Quattrone, 2010).

 Commission of authority: cash appreciates the delegation of authority. It set the target
inside that the delegated authority may be enforced. Lower level authority might act
maiden and legal document inside the budget limits. Motivation: cash assist the organisation to stimulate the performance of the firm and
conjointly motivates the workers to try and do higher with the organisation's operations.
Motivation is that the tool by that workers feel associated to the firm and work with
additional potency in order that the firm would ready to create its operations additional
profitable. Maximization of revenues: cash helps the organisation to utilize companies human and
different resources effectively in order that the most output will gain. this is often the tool
by that the firm would ready to boost their revenues and conjointly suppose their
diversification.
 Estimating fund requirement: cash is that the technique that is employed to create their
operation effective and conjointly helps the finance managers to know the necessity of
the operating capital for his or her existent trading operations or latest one.
Budgeting act as a effective tool or technique for impressive planning and helpful in
hedging the risk or minimizing the losses of the respective business. In fact the main purpose of
the budgeting is to prepare an effective strategy for accurate estimation of future and present
costs.
Apart from this some of the useful advantages of the budgeting method is-
1. Helpful in minimizing the losses.
2. Hedge the upcoming risk and challenges.
3. Create a coordinative environment in between lower level and higher level.
4. Accurate estimation of future costs.
M.3.Use of various planning instrument for change and prediction budgets.
Forecasting method is to outline the elemental problems impact the forecast. the result of
this commencement can offer insight into that statement strategies are most correct and can
facilitate produce a standard understanding among the forecasters on the goals of the statement
method(Kaplan, and Atkinson, 2015).
 Gathering information: To support the prediction method, use applied mathematics
information still because the assembled judgement and experience of one-on-one within

and maybe conjointly outside the organization. for example, sector heads could have
associate insight into activities at intervals their own section.
 Preliminary associated exploration analysis: during this analysis ought to think about an
investigation of historical information and relevant financial condition. By this we are
able to improve the standard of statement by giving the predictor improved once it had
been quantitative techniques may be appropriate and is also helpful for postscript
statement methodology.
 Select method: conclude the quantitative or qualitative statement strategies that may be
used. confine mind that the chosen methodology for one system could dissent for a few
alternative.
 Implement method: manufacture the prediction and victimization calculate ranges ar
enclosed at intervals the implementation strategies. creating the calculate. place into
activity one or additional of the foretelling strategies delineate on top of. Calculate
ranges. it's going to be knowing develop a spread of attainable forecast outcomes, with
the utilization of various premise.
Various types of the budgets are-
1. Fixed, Flexed and Flexible budgets:- Budget which does not change due to reforms in
any factors or elements that means that there is no affect on the fixed budget because of
increase or decreases in unit of production or any other things. Whereas flex budget is
also known as flexible budget shows the changes which occurs because of reforms in
other cost or production unit. Basically flexible budget adjusted due to change in volume
of task or activity.
The main benefit of the fixed budget is that it is very easy to pay or estimate because it never
change due to the production of new product.
Flexible budget also act as a very useful and effective tool in analysing the cost due to their
simplex nature.
2. Functional budgets :- Basically this budget is also known as master budget for the small
enterprises by describing overall functions of all the department of the business. The
major task of this budget is to divide all the works in a proper manner.
The main advantage of this budget is that it performs all the functions of various department of
the organization.

3. Traditional budget :- This budget is based on previous norms and rules as well as it
depend upon past strategies.
4. Zero based budgets :- It started from zero which justified various expenses for every fresh
period.
D.3(L3&4).Use planning tools for accounting to resolve the fiscal problem of the company.
Some special tools that which we have used in below: Fiscal Planning: The most subjective of any organization is operation of profits. This
objective is achieved by creating correct or sound business coming up with. Hence,
business coming up with is taken into account as best tool for achieving business
objectives(Renz, 2016). Business Statement Analysis: P&L account and record area unit essential business
authorities. These authorities area unit analysed for various amount. this kind of study
helps the management to grasp the speed of growth of business involvement. This
analysis is completed through relative business authorities, common size authorities and
quantitative relation analysis. Value Accounting: accountancy presents value knowledge in merchandise wise, method
wise, department wise, branch wise and also the like. These value knowledge area unit
compared with planned one. This scrutiny of 2 prices allows the management to make a
decision the explanations chargeable for the variation between these prices.
 Fund Flow Analysis: This analysis verify the movement of fund from one amount to a
different. moreover, this analysis is extremely helpful to grasp whether or not the fund is
right used or not during a year in comparison to the previous year. The assets alteration
and funds from activeness also are verify through this analysis.
TASK4.
P.5.Organisations are accommodate administration explanation systems to react to fiscal
difficulty.
Organisation are adapting the the management accounting for get the profit. It is helpful
to manage the organisation with the help of management by it the organisation run smoothly and
the subsumption not take place. By the help of accounting system you can resolve the problems
of financial accounting. Management accounting plays a role internally in the firm and giving